Organizational Strategy, Information Systems, and Competitive Advantage Chapter 3.

Organizational Strategy, Organizational Strategy, Information Systems, and Information Systems, and Competitive AdvantageCompetitive Advantage

Chapter 3Chapter 3

Felix makes it to meeting, offers good input

Group used discussion board, got good input from instructors

Neil suggests looking at data to analyze impact of suggested options before making any decisions

Group getting more people involved and developing a process for making a good decision

This Could Happen to You: “I Need to Look This Could Happen to You: “I Need to Look at the Data and See the Impact”at the Data and See the Impact”

3-2Copyright 2012 Pearson Education, Inc. for Prentice Hall

FlexTime scenario video

Study Questions

3-3Copyright 2012 Pearson Education, Inc. for Prentice Hall

Q1: How Does Organizational Strategy Determine Information Systems Structure?

3-4Copyright 2012 Pearson Education, Inc. for Prentice Hall

Organizations examine structure of their industry and determine a competitive strategy.

Competitive strategy determines value chains determine business processes.

Structure of business processes determine design of supporting information systems.

Figure 3-2

Q2: What Five Forces Determine Industry Q2: What Five Forces Determine Industry Structure? Structure? Porter’s five competitive Porter’s five competitive forcesforces

3-5Copyright 2012 Pearson Education, Inc. for Prentice Hall

1

4 5

2

Five Forces and FlexTime

3-6Copyright 2012 Pearson Education, Inc. for Prentice Hall

Five Forces and FlexTime (cont’d)

3-7Copyright 2012 Pearson Education, Inc. for Prentice Hall

Q3: What Is Competitive Strategy?

3-8Copyright 2012 Pearson Education, Inc. for Prentice Hall

Porter’s Four Competitive Porter’s Four Competitive StrategiesStrategies

• Goals, objectives, culture, and activities must be consistent with its strategy

• Information systems must facilitate its competitive strategy

To be effective, an organization’s:

What Is Competitive Strategy? (cont’d)

3-9Copyright 2012 Pearson Education, Inc. for Prentice Hall

•Value—amount of money a customer is willing to pay for a resource, product, or service

•Margin—difference between value an activity generates and cost of activity

•Value chain—a network of value-creating primary and support activities

Competitive strategy implement

ed by creating

value

Q4: How Does Competitive Strategy Determine Value Chain Structure?

3-10Copyright 2012 Pearson Education, Inc. for Prentice Hall

Bicycle Maker’s Value Chain: Sum of Primary and Support Activities

3-11Copyright 2012 Pearson Education, Inc. for Prentice Hall

Support ActivitiesSupport Activities

Primary ActivitiesPrimary Activities

Summary of Value Chain: Primary Summary of Value Chain: Primary ActivitiesActivities

3-12Copyright 2012 Pearson Education, Inc. for Prentice Hall

Support Activities in the Value ChainSupport Activities in the Value Chain

3-13Copyright 2012 Pearson Education, Inc. for Prentice Hall

TechnologyR & D, New Techniques, Methods, Procedures

Procurement Raw Materials

Human ResourcesTraining, Recruiting, Compensation

Firm Infrastructure General Management, Finance, Accounting, Legal, Government Affairs

Support Activity

Description

• Linkage means interactions across value activities readily supported by information systems

• Manufacturing systems use linkages to reduce costs

Value Chain Linkages

3-14Copyright 2012 Pearson Education, Inc. for Prentice Hall

Sales forecasts

used to plan production

Production plan used to

determine raw materials needs

Material needs used to schedule

purchases

Just-in-time inventory

Reduced inventory sizes and

costs

Business Process DesignBusiness Process Design

3-15Copyright 2012 Pearson Education, Inc. for Prentice Hall

Support activities contribute indirectly to production, sales, and customer service,

and

Produce margin that is often difficult to calculate (intangible costs and benefits)

Q5: How Do Value Chains Determine Business Processes and Information Systems?

3-16Copyright 2012 Pearson Education, Inc. for Prentice Hall

Value Chain for Bicycle Rental Company: Low-Value Chain for Bicycle Rental Company: Low-VolumeVolume

3-17Copyright 2012 Pearson Education, Inc. for Prentice Hall

Value Chain for Bicycle Rental Company: High-Value Chain for Bicycle Rental Company: High-VolumeVolume

3-18Copyright 2012 Pearson Education, Inc. for Prentice Hall

Q6: How Do Information Systems Q6: How Do Information Systems Provide Competitive Advantages?Provide Competitive Advantages?

3-19Copyright 2012 Pearson Education, Inc. for Prentice Hall

Creating new products or services

•Enhancing existing products or services

• Differentiating• By cost• By quality

Competitive Advantage via ProductsCompetitive Advantage via Products

3-20Copyright 2012 Pearson Education, Inc. for Prentice Hall

Role for Information Systems Regarding Role for Information Systems Regarding Products: Am Example of Automobile Products: Am Example of Automobile ServiceService

3-21Copyright 2012 Pearson Education, Inc. for Prentice Hall

Competitive Advantage via Business Competitive Advantage via Business ProcessesProcesses

3-22Copyright 2012 Pearson Education, Inc. for Prentice Hall

How Does an Actual Company Use IS How Does an Actual Company Use IS to Create Competitive Advantages?to Create Competitive Advantages?

3-23Copyright 2012 Pearson Education, Inc. for Prentice Hall

Example: ABC’s Information System

To maintain customer account data• IS collects information for ABC (adds value)• IS saves customers time by automatically filling in

part of form (adds value for customer)

Package and information delivery system• IS helps customer to select delivery address and

generate shipping labels (adds value for customer)What value does shipper get?

ABC Web Page to Select Recipient from Customer’s Records

3-24Copyright 2012 Pearson Education, Inc. for Prentice Hall

ABC Web Page to Select a Contact from Customer’s Records

3-25Copyright 2012 Pearson Education, Inc. for Prentice Hall

ABC Web Page to Specify Email Notification

3-26Copyright 2012 Pearson Education, Inc. for Prentice Hall

ABC Web Page to Print Shipping Label

3-27Copyright 2012 Pearson Education, Inc. for Prentice Hall

Enhancing existing products

Differentiating products

Locking in customers

Raising barriers to market entryIncreasing profit margins by decreasing costs and decreasing errors

Review: How Does This System Create a Review: How Does This System Create a Competitive Advantage?Competitive Advantage?

3-28Copyright 2012 Pearson Education, Inc. for Prentice Hall

Seek ways to save costs without compromising competitive strengths over rivals.

State their goal differently: Examine all value-generating activities to see if there isn’t some way of reducing costs, without reducing value generated.You know a process for tracing development from analysis of industry structure all the way through to requirements for information systems. All activities in firm need to facilitate the organization’s competitive strategy.

How Does Knowledge in This Chapter How Does Knowledge in This Chapter Help FlexTime and You?Help FlexTime and You?

3-29Copyright 2012 Pearson Education, Inc. for Prentice Hall

Who will be your competitors when you seek a job after you graduate from college?

What will be your competitive advantage in the job market?

What can you do before you graduate to develop your competitive advantage?

Guide: Your Personal Competitive Guide: Your Personal Competitive AdvantageAdvantage

3-30Copyright 2012 Pearson Education, Inc. for Prentice Hall

Active Review

3-31Copyright 2012 Pearson Education, Inc. for Prentice Hall